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The Rise and Fall of a Rainmaker

John J. Altorelli, left, at a charity dinner in 2010, with Anna Chapman, center, his Russian girlfriend, later accused of being a spy.Credit
Patrick McMullan/PatrickMcMullan.com

The messy collapse of the mega-firm Dewey & LeBoeuf has claimed another casualty, and this time it’s one of the defunct law firm’s leading rainmakers.

Partnership in a major law firm, the brass ring in a legal career, once conferred lifetime job security, prestige and entry into the 1 percent — in some cases, the one-tenth of 1 percent. But the collapse in 2012 of Dewey & LeBoeuf, which had roots on Wall Street that dated to the 19th century and bore the name of a former Republican presidential candidate and New York governor, Thomas E. Dewey, laid bare the increasingly Darwinian competition for lucrative clients that has afflicted even the highest ranks of the profession.

John J. Altorelli, now co-head of the United States finance practice at DLA Piper, the world’s largest firm measured by revenue, was among Dewey & LeBoeuf’s most important rainmakers, the term used to denote partners who land clients. At his peak, he was credited with generating more than $33 million in annual revenue for the firm. In 2011 alone, his compensation was $6 million. That same year, the firm was so eager to keep him as a partner that it offered a contract guaranteeing him $5 million a year for three years.

Befitting his status as a top rainmaker, he had his own car and driver. He was out on the town nearly every night, often in the company of celebrities and models, and he was the host of countless parties and client events. (I should know: Mr. Altorelli briefly occupied the penthouse in my apartment building.) He was allocated a $1 million annual client development budget, and in one instance, he was reimbursed $75,000 for Super Bowl tickets and related expenses. His departure from Dewey & LeBoeuf in April 2012 was a precipitating factor in the firm’s collapse, which came soon after, in May 2012.

Despite all these trappings of success, Mr. Altorelli, who is 57, filed for personal bankruptcy protection on Nov. 25 in Connecticut, where he owns a sprawling home currently on the market for $3.9 million.

In a cautionary tale for any firm that may be contemplating a bankruptcy filing, the trustee overseeing Dewey & LeBoeuf’s bankruptcy is suing him for $12.9 million. He’s surrounded by lawyers and is personally responsible for his legal fees. He’s been grilled by prosecutors and cited as a potential witness in the pending criminal trial against Dewey & LeBoeuf’s former leaders. The Internal Revenue Service is on his back.

“Filing for bankruptcy is the worst possible outcome,” Mr. Altorelli said when I reached him this week. “It’s hard to imagine that 20 years of effort could be wiped out in this fashion.”

He declined to discuss his predicament in any detail. But others did, including several former Dewey partners, and in some cases, they shared internal emails. They asked not to be named, given both the continuing bankruptcy proceeding and the criminal case.

At least some of Mr. Altorelli’s problems appear to be self-inflicted. Mr. Altorelli could have settled the trustee’s claims — as most other former Dewey & LeBoeuf partners did — for a comparatively modest amount, about $1.4 million. (Two other former Dewey & LeBoeuf partners have also filed for bankruptcy protection, but neither was a rainmaker.)

And Mr. Altorelli, the proverbial grasshopper in Aesop’s fable, didn’t exactly save for a rainy day. The very qualities that made him such an effective rainmaker — generosity, gregariousness, his tireless socializing — contributed to his current predicament. “Money is not important to me. I shared my good fortune with people I care about, including the many charities I support,” Mr. Altorelli told me.

Mr. Altorelli, one of 10 children, grew up in Derby, Conn. His father was disabled and his mother stayed home. He served six years in the Air Force before attending Cornell Law School. Though he had what some at the firm considered a lavish expense account, it didn’t cover nearly all of Mr. Altorelli’s out-of-pocket costs.

At a 2008 event, “Masquerade in Venice,” given by the supermodel Petra Nemcova to benefit her Happy Hearts Fund charity, Mr. Altorelli asked the firm to pay for two $25,000 tables, but paid for another out of his own pocket. According to an email he wrote after the firm questioned the business purpose of the evening, Mr. Altorelli responded that his guests represented “over 20 private equity and hedge fund guys.” He added, “This is one of the big events of the year and it is attended by all of the major players.” He was reimbursed.

Dewey & LeBoeuf also reimbursed Mr. Altorelli for parties he attended with Nouriel Roubini, the New York University economist whose gloomy forecasts foreshadowed the financial crisis and made him an academic celebrity. Besides being an academic and consultant, Professor Roubini is an inveterate party giver. Dewey & LeBoeuf saw him as a potential source of clients, although there is no indication he ever generated any. And Professor Roubini said he had never discussed or done any business with Mr. Altorelli or his firm.

At one of the parties, Mr. Altorelli, who is divorced, met an émigrée from Russia, Anna Chapman, who said she had her own real estate business. The two began dating.

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In June 2010, Ms. Chapman was arrested by the F.B.I. on charges that she was a member of a Russian spy ring embedded in the United States. Her father was described as a prominent K.G.B. agent. She attracted enormous media coverage. A London newspaper called her “the red under the bed.” She pleaded guilty to a conspiracy charge and was deported to Russia in July 2010 as part of a prisoner exchange, all of which was a shock, Mr. Altorelli told partners at his firm. He also had the awkward task of notifying his major clients.

As Dewey & LeBoeuf’s finances deteriorated after the financial crisis, Mr. Altorelli considered jumping to another firm (“It’s clear you have one foot out the door, if not two,” Stephen DiCarmine, the firm’s executive director, wrote in a 2011 email.) But offers of the $5 million guarantee, a seat on the firm’s executive committee and other reassurances persuaded him to stay.

Nonetheless, the not-so-subtle pressure to land clients and keep generating millions in revenue was evident in the email from Mr. DiCarmine. Much of Mr. Altorelli’s revenue came from one client — Capmark Financial Group, the former commercial mortgage business owned by General Motors that was sold to a private equity group in 2006. In its numerous corporate maneuvers, including a trip through bankruptcy court, Capmark was a veritable Mount Vesuvius of legal fees. Thomas Fairfield, then its general counsel, was a close friend of Mr. Altorelli’s and had worked with him years earlier in the LeBoeuf firm’s Hartford office. Mr. Altorelli landed the coveted role of debtor’s counsel to Capmark during its bankruptcy, which kept numerous Dewey & LeBoeuf lawyers occupied for years.

But Mr. DiCarmine noted in the 2011 email that without Capmark, “Your revenue production would not be in the range it has been and there is no ‘insurance’ that it will be at those levels in the future.” He went on, “But, we believe you will continue to hustle business, and deliver it, and are prepared to offer you the $5 million guarantee (for three years.)”

Mr. Altorelli replied in an email: “It is not just money. I have bigger concerns with the firm, and a two-page piece of paper that says I should make x over the next 3 years if I bring in around 100 million sort of tells me that I am expected to keep the firm afloat.” He added, “I am pretty sure I will deliver as I have every single year of my career.”

Mr. Altorelli never signed the proffered multimillion-dollar contract. He did stay until nearly the end, and former partners credit him with valiant efforts to save the firm, including forgoing much of his compensation in 2012. He left for what he surely thought would be a comfortable future at DLA Piper.

He soon realized otherwise. Just days later, on April 8, 2012, The New York Post ran an article with the headline, “Anna: The Spy Who Loved Me,” disclosing their previous relationship. (The timing, nearly two years after Ms. Chapman was deported, suggests someone at Dewey leaked the story.) It couldn’t have come at a worse time, just as he was recruiting clients to his new firm. Whether it had any impact, his billings at DLA Piper haven’t nearly reached the levels they had been at Dewey & LeBoeuf. Although he still represents Capmark, all the deals listed on his profile at DLA Piper date from his time at Dewey & LeBoeuf.

Worse, from a financial perspective, Dewey & LeBoeuf’s bankruptcy trustee announced that he would seek to claw back partner compensation from the years 2011 and 2012. This was especially onerous for Mr. Altorelli. At the firm’s request, he had agreed to be paid the $2 million in compensation due him in 2010 early in 2011, which pushed it into the clawback period. The trustee offered to settle with Mr. Altorelli for about $1.4 million, but wouldn’t exempt the $2 million. Mr. Altorelli refused to settle. The trustee subsequently sued him for $12.9 million.

Then there’s the Internal Revenue Service. As part of the bankruptcy proceeding, many of the firm’s creditors waived or reduced their claims. All canceled debt is treated as income to the firm for tax purposes, even though no money changed hands. Because Mr. Altorelli earned so much from the firm, his share of this so-called phantom income was correspondingly high. The I.R.S. is seeking tax on $8.9 million of income in 2011 alone.

Like many law firm partners, Mr. Altorelli had also borrowed his contribution of about $1.8 million to the firm’s capital. That was wiped out in the bankruptcy, and he now owes Barclays for the loan. He also lost his pension fund contribution.

The last straw for Mr. Altorelli came on Oct. 29, when a federal bankruptcy court judge ruled that the trustee’s lawsuit against Mr. Altorelli and other holdout partners could proceed.

Even though Mr. Altorelli earned over $13 million in four years at Dewey & LeBoeuf, in his bankruptcy petition he said he now had total assets of $1 million to $10 million and liabilities of $10 million to $50 million.

A version of this article appears in print on December 13, 2014, on Page B1 of the New York edition with the headline: The Rise and Fall of a Rainmaker. Order Reprints|Today's Paper|Subscribe